Deborah Welsh's vehicle caught fire twice after the lantern landed on her windshield.
The 48-year-old was celebrating at a party in Scunthorpe, North Lincolnshire and didn't discover the wreck until the morning. She said: "I thought Chinese lanterns were banned and I think they definitely should be after this. The car had broken down and I had left it outside my son's house as we couldn't move it.
"The next day I was going to be trading it in for a new car and had cancelled the insurance.
"I'm devastated, as I have no way to get around or get my grandson to school."
Firefighters used hose reels to tackle the flames, which had started when the lantern set wiper blades and the plastic trim alight, before flames spread to the engine bay. A passer-by saw the lantern land and firefighters confirmed that it had caused the fire. The whole bonnet and engine below were completely charred.
A Humberside Fire and Rescue Service spokesman said: "As this incident shows, Chinese lanterns can pose a real fire risk because there is no way of knowing where they will land.
"They could start fires which would then go undetected until serious damage had been caused."